Broadgate: Market News 6/9

6 September 2012

Stocks closed out a second straight session of thin trading on Wednesday, with investors reluctant to make big bets ahead of a crucial meeting of the European Central Bank, which could announce new policies to help contain the euro zone’s debt crisis.

Media reports that European policymakers would unveil a bond-buying plan to bring down crippling borrowing costs in euro zone economies boosted sentiment, but it wasn’t enough to drive gains in stocks.

Shares opened lower, hurt by FedEx Corp, which late Tuesday cut its quarterly profit outlook on weakness in the global economy. FedEx is considered an economic bellwether because of its role as the No. 2 world shipping company. The stock fell 2 percent to $85.80, United Parcel Service fell 2.4 percent to $71.94 and the Dow Jones Transportation index .DJT lost 1.1 percent.

“While FedEx is only one company, it’s one whose warning is indicative of the global economic slowdown we’re dealing with,” said Leo Grohowski, chief information officer at BNY Mellon Wealth Management in New York.

Equities seesawed between positive and negative territory throughout the session. About 5.49 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s daily average of 7.84 billion in a sign of investor caution.

Central Bank sources told Reuters the ECB was ready to waive seniority status on government bonds it buys under a new program which it is set to agree on at Thursday’s Governing Council meeting.

Bloomberg earlier reported that the ECB would, with broad support from its council members, unveil an unlimited, sterilized program of bond purchases. The ECB has been expected to be cautious about disclosing the size of its bond-buying, given opposition from Germany’s central bank.

Further details of the plan will be revealed by ECB President Mario Draghi after Thursday’s meeting, but some analysts cautioned the ECB may opt to wait until after the German constitutional court rules on the region’s bailout funds on September 12 to announce any new steps.

“While some of the rhetoric coming out of Europe has been positive, we’ll need to see follow-through in actions now,” said Grohowski, who helps oversee $171 billion in client assets.

The Dow Jones industrial average was up 11.54 points, or 0.09 percent, at 13,047.48. The Standard & Poor’s 500 Index was down 1.51 points, or 0.11 percent, at 1,403.43. The Nasdaq Composite Index was down 5.79 points, or 0.19 percent, at 3,069.27.

Equities have received a boost in recent months on expectations the ECB would start buying Spanish and Italian government bonds to ease the pressure on those countries’ bond markets and that the Federal Reserve will adopt new stimulus to prop up the economy. The S&P is up about 7 percent since the start of June.

Nokia and Microsoft Corp took the wraps off their most powerful smartphone on Wednesday, but the new Lumia failed to impress investors in what may have been the last major shot at winning back a market dominated by Apple, Samsung and Google.

Shares of Facebook Inc rebounded almost 5 percent off an all-time low after the company promised not to sell stock to cover a nearly $2 billion tax bill and said it will allow employees to cash in their stock weeks ahead of schedule, moving to soothe nervous investors and its own staff as its share price spiraled downward from its $38 IPO price.

About 55 percent of companies traded on the New York Stock Exchange closed lower while 53 percent of Nasdaq-listed shares closed lower.

Commodities

Brent crude prices fell on Wednesday, while U.S. crude inched up in seesaw trade ahead of a European Central Bank meeting and a U.S. August payrolls report as investors await central bank action in the face of slowing economic growth.

Brent October crude fell $1.09 to settle at $113.09 a barrel on Wednesday, after dropping as low as $112.73.

U.S. October crude edged up 6 cents to settle at $95.36 a barrel, dropping to $94.26 and then reaching $96.03 in post-settlement trading.

Gold ticked lower in thin trade on Thursday, but stayed within sight of its highest in nearly six months ahead of the European Central Bank meeting, which could announce new policies to help contain the euro zone’s debt crisis.

Sources told Reuters the ECB is ready to waive seniority status on government bonds it buys under a new program which it is set to agree on at Thursday’s Governing Council meeting.

Currencies

The euro held firm in Asia on Thursday, having rallied sharply overnight on renewed hopes the European Central Bank will unveil a plan to help ease funding strains for stressed euro zone members.

The single currency powered to a high of $1.2625, from a low of $1.2502. It last stood at $1.2596, within easy reach of an eight-week peak around $1.2638 set on August 31.

The U.S. dollar, though, continued to gain ground against a broadly weaker Australian currency. The Aussie was at $1.0190, having plumbed a near two-month low around $1.0167.

Since reaching a high of $1.0615 in early August, the Aussie has shed more than 4 U.S. cents as markets grew more bearish about China, Australia’s most valuable export market.

Source: Reuters.com

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